Toutiao pockets $1 billion on the road to becoming China’s next BAT

Chinese news reading app Toutiao secured US$ 1 billion in a series D round financing at the end of 2016 from investors including returning backer Sequoia Capital and CCB International, the investment arm of China Construction Bank, local media is reporting (in Chinese).

The Flipboard-like news aggregator app has developed rapidly since its establishment in 2012. The current round was reportedly received at a whopping 11 billion USD market valuation, more than 20 times higher than the 500 million USD valuation it got when receiving 100 million USD C round more than two years ago.

Interestingly, the news added that Liu Zhen, SVP of Toutiao, is behind the deal. Liu Zhen, a cousin of Didi Chuxing’s president Liu Qing, previously worked as SVP of Uber China to oversee corporate strategy. She joined Toutiao in October 2016 after the Didi and Uber China merger.

The current round also witnessed the exits of Sina and Zhou Hongyi, CEO of Qihoo 360, renowned local tech blogger Lei Jianping disclosed. Sina has sold its share to other investors because there’s increasing business competition between the two companies. Nevertheless, this deal by all accounts must be a profitable deal for Sina, which invested in Toutiao’s C round when its valuation was only 500 million USD. Zhou Hongyi made the sale to cash in to fund Qihoo’s privatization plan.

Lei citing people familiar with the matter that the new funding will be used to support the generation of quality contents. The company is planning to invest in video business and Q&A services in 2017.

In addition, the firm’s aggressive overseas expansion initiative also needs a lot of financial support. As of present, the company has entered North America, Brazil, India, Indonesia and Japan through its news feed app Toutiao or the news aggregation apps it has invested in. Aside from holding stakes in Dailhunt and BABE in Indonesia, Toutiao acquired Flipagram, a popular video app in the US, this Febuary. The app claimed over 12 million users overseas, local media reported.

Toutiao might be still a lesser-known name overseas, but it is one of the local tech giants that have the potential to lead China’s IT industry as a successor to China’s new BAT. As of the end of 2016, The app claimed over 78 million daily active users and 175 million monthly active users with users spending an average 76 minute on the app per day. Amid the video boom, Toutiao is also integrating short-video businesses with video clicks per day surged 605% YOY to around 130 million by 2016. The company has allocated last year 1 billion RMB funding to encourage PGC short video productions.

Like many companies involved in the content agrregation business, Toutiao has hit a speed bump for copyright issues. In 2014, several Chinese mainstream media, including Sohu, filed lawsuits against the company for using their contents illegally. Toutiao solved this problem by launching a program to register mainstream media known for their original contents to protect their rights. Registered medias can receive revenue from content after they claimed to be the original source, even though they publish the contents later than other sources.

The Chinese news app battlefield is quite crowded. Big competitors in the field include Tencent-backed Kuaibao, Alibaba-backed UC Toutiao, Yidian Zixun and more.

TechNode has reached out to the company for their comment on the news and will update when they respond.